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Take Advantage of Soybean Price Rallies

There was thunder last week about how the age of hefty grain prices is history. May as well have played a snippet of the late Dandy Don Meredith’s, “turn out the liiights, the party’s over….”

But despite gloomy projections for slow economic growth in China and other big buyers of U.S. soybeans and corn, any experienced farmer knows there’s never a guarantee that markets will be up or down. In July, November 2013 soybean futures traded at $12.30 early on, before rallying to $12.90, and backing off to below $12.20 on Tuesday. Swings of 60¢ and 70¢ can mean $35-40/acre for typical soybean crops.

Price volatility has not been put to bed. And if a price bounce hits a level that work’s in a farmer’s budget, take action, says Ed Usset, University of Minnesota grain marketing specialist.

“You have to be committed to get something done when the opportunity arises,” he says. “Have a number in your head. When it shows up, get something done.”

Darrel Good, University of Illinois agricultural economist, sees worldwide demand for soybeans as a plus for producers. “Assuming that the 2013 U.S. soybean crop is near its potential of 3.4 billion bushels, rationing should not be an issue in the 2013-2014 marketing year,” he says.

It will be up to demand strength, he adds, and two factors support prospects for strong bean demand in the year ahead. “First is the expectation that China will continue to import large quantities of soybeans so that U.S. exports will increase, even with large crops in South America,” Good says.

Sales to China are about 25 million bushels larger than at this time last year. And

export sales data shows China has already purchased nearly 400 million bushels of U.S. soybeans for import during 2013-2014.

In addition, Good says biodiesel production is increasing. USDA projects soybean oil used for biodiesel will reach 5.5 billion pounds in 2013-2014, up from 4.8 billion pounds this year and 4.87 billion pounds last year. “The projection represents nearly 28% of total projected domestic use and exports of U.S soybean oil,” he says.

So while corn prices may face further pressure, beans may be better positioned for good sales. “Demand prospects for soybeans appear to be strong,” Good says. “If that is the case, a period of higher soybean prices relative to corn prices would be expected.”